Are the parents to blame? Predicting franchisee failure

Ilan Alon, Michèle Boulanger, Everlyne Misati, Melih Madanoglu

Research output: Contribution to journalArticlepeer-review

18 Scopus citations

Abstract

Purpose – The purpose of this study is to show how franchisor characteristics influence franchisee failure. To achieve this aim, we developed a heuristic model using the methodology and power of predictive analytics. Design/methodology/approach – The authors use data from the World Franchising Council’s and from the Small Business Administration (SBA). The data cover 271 diverse USA franchise chains that are present in both databases. Findings – The model predicts potential defaults of SBA-backed loans issued to American franchisees, and the authors identify 13 variables that help explain franchisee failure. Practical implications – The authors offer guidance for stakeholder groups – lenders, franchisors and franchisees – to minimize the risk of lending and business failure. Originality/value – The paper contributes to the franchising literature by considering parent firms’ characteristics to predict franchisee failure.

Original languageEnglish
Pages (from-to)205-217
Number of pages13
JournalCompetitiveness Review
Volume25
Issue number2
DOIs
StatePublished - 2015
Externally publishedYes

Keywords

  • Failure
  • Franchising
  • Predictive analytics
  • Small business financing

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